AMD 2000 Annual Report Download - page 382

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The table above presents principal (or notional) amounts and related
weighted-average interest rates by year of maturity for our investment portfolio
and debt obligations as of December 31, 2000 and December 26, 1999.
Foreign Exchange Risk We use foreign currency forward and option contracts to
reduce our exposure to currency fluctuations on our foreign currency exposures
in our foreign sales subsidiaries, liabilities for products purchased from FASL
and for foreign currency denominated fixed asset purchase commitments. The
objective of these contracts is to minimize the impact of foreign currency
exchange rate movements on our operating results and on the cost of capital
asset acquisition. Our accounting policy for these instruments is based on our
designation of such instruments as hedging transactions. We generally do not use
derivative financial instruments for speculative or trading purposes.
We had $207 million (notional amount) of short-term foreign currency forward
contracts denominated in Japanese yen, British pound, European Union euro,
Singapore dollar and Thai baht outstanding as of December 31, 2000.
In 1998, we entered into an intercompany no-cost collar agreement to hedge
Dresden Fab 30 project costs denominated in U.S. dollars. The no-cost collars
included purchased put option contracts and no-cost collar written call option
contracts, the contract rates of which were structured to avoid payment of any
option premium at the time of purchase. During 1999, we entered into various
option positions with various third-party banks to neutralize the exposures of
the outstanding put and call option contracts. As a result, all the options were
offset and canceled and we had no outstanding option contracts as of December
31, 2000.
We are party to an interest rate swap under which we received fixed-interest
payments in exchange for variable interest payments calculated on a notional
principal amount of $400 million. The swap is not designated as a hedging
instrument and had a fair value of $2.9 million at December 31, 2000. In
February 2001, we cancelled the swap and recognized an incremental gain of
$475,000.
Gains and losses related to the foreign currency forward, option contracts and
interest rate swaps for the year ended December 31, 2000 were not material. We
do not anticipate any material adverse effect on our consolidated financial
position, results of operations or cash flows resulting from the use of these
instruments in the future. We cannot give any assurance that these strategies
will be effective or that transaction losses can be minimized or forecasted
accurately.
The table on the next page provides information about our foreign currency
forward and option contracts as of December 31, 2000 and December 26, 1999. All
of our foreign currency forward contracts mature within the next 12 months.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001